Professor John Clapp (University of Connecticut) and I are currently working on a new version of our study on real option value in hedonic regression frameworks. In short: we suggest an improved index estimation technique which we apply on data from Berlin home sales. The paper is still very “pre-alpha”, but one result is so fascinating that I would like to share it already.
West-Berlin’s home values 1978-2007: prices in free fall.
(Hedonic index estimated on individual transaction data provided by Berlin’s Gutachterausschuß für Grundstückswerte. For a full discussion please see working paper.)
It does not come as a surprise that Berlin home values did perform well in the last years. The extend of the decline, however, is breath-taking: Berlin home values lost a staggering 46% in real terms since its all-time peak in 1993. If you know of any major city in the world that experienced a similar melt-down, please let me know.
The loss is even more severe against the background of strong real estate markets in most other European capitals. What went wrong in Berlin?
Berlin’s home values compared to selected European peers.
All prices are in nominal terms. Peers were selected on data availability. For sources → click here.
4 Comments
Maybe the better question would be: What went right in Berlin? Cheap space is one of the reasons for the attractiveness Berlin is beaming into the world for a lot of people including start-ups …
Well, Johan, one man’s meat is another man’s poison.
You are right, cheap space is a key ingredient for Berlins thriving arts, party, media, and start-up landscape. What I wonder, however, is whether all this creativity will materialise in economic prosperity. For Mitte, Prenzlauer Berg, parts of Friedrichshain and Kreuzberg, the conversion from colorful cheap space to gentrified mid-class quarters is happening. But how will other neighborhoods develop? How will Lichtenberg look like in 20 years?
Cheap space is not only attracting students and the creative. Glaser and Gyourko show that falling home values will lead to an influx of unskilled population. Will we see a polarised Berlin, with prospering cores next to failing neighborhoods?
A fascinating read: Bericht Monitoring Soziale Stadtentwicklung 2009 (in German).
Lieber Thies, leider kann ich nicht so gut englisch, um Eure Berichte zu lesen. Ich bräuchte Lexika usw, dh es bedeutete richtig viel Arbeit für mich, mich durchzuackern. Interessieren würde mich Eure Arbeit trotzdem. Könnt Ihr Euch vielleicht noch einen Übersetzer einstellen? Ist unter der entsprechenden Rubrik wirklich meine Website gefragt? Die heißt www.wollewerkstatt.de Ansonsten wünsche ich Euch viel Glück und Erfolg! Tante Ingeburg
Die Daten sind tatsächlich bemerkenswert. Mir fallen dazu zwei Dinge auf:
1. Ein Vergleich mit London wäre interessant. London hat bis zu den Lehman Bros einen unfassbaren Immobilienboom erlebt, und danach einen ebenso unfassbaren Absturz.
2. Der Buckel zwischen 1990 und 1995 ist wohl eine Auswirkung der Wiedervereinigung, denn Berlin war “heiss”—-nur dass der massive Run auf Berlin dann doch ausblieb. Die Frage ist nur: Warum eigentlich?
Cheers.
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